2.2 Conflicts of Interest & Personal Trades in Real Estate
Key Takeaways
Under Rule 62(1), a licensee trading on their own behalf gives their licensed status and brokerage name to the other party’s licensee. An unrepresented buyer or seller receives additional written disclosure about interests, value and further negotiations.
When a covered brokerage associate, employee or family member seeks to buy property listed or managed by the brokerage, Rule 62(2)–(3) requires immediate disclosure to the seller and an opportunity for independent advice.
A brokerage guaranteed sale requires a separate trust deposit of at least 5% of the amount that may be payable. Under Act section 20(8), a guarantor purchasing under the agreement cannot charge the seller commission.
Under Rule 45, disclose the contact information forwarded and potential referral benefit in writing and keep a copy. Take reasonable steps to confirm a receiving licensee is authorized for the activity.
Get the client’s informed written consent before sharing personal information in a planned referral, as RECA advises. Route any trade-related referral fee through the registered brokerage under Rule 54.
Conflicts of interest and personal trades
A conflict arises when a personal interest or competing obligation could impair the licensee's ability to serve a client. An associate wanting to buy a listed property may have access to the seller's price limit, and an associate receiving a referral benefit has an incentive to recommend a particular provider. Identify the interest, identify the person owed the duty, and decide whether continued service is appropriate.
Disclose and decide whether to continue
Under Rule 41(f), disclose a conflict to a client at the earliest practical opportunity. Rule 55 requires written disclosure of services, other roles, potential conflicts and relevant facts before eliciting confidential information or as soon as possible after receiving it, and in any event before entering a service agreement. If a disclosed fact materially changes, disclose the change immediately. Use best efforts to obtain written acknowledgement. Under Rule 54(3), providing services to a client or prospective client in a conflicted trade requires the person's informed written consent. Acknowledging receipt of a disclosure and consenting to continued service are separate decisions. Follow the broker's policy and arrange independent representation or withdraw if the conflict cannot be managed.
Personal trades under Rule 62
A real estate licensee buying or selling on their own behalf has a direct personal interest. A purchase through a company in which the licensee has an interest can be an indirect personal trade. Follow brokerage policy and disclose at the earliest practical opportunity, before presenting an offer, as RECA directs.
| Other party's situation | Written disclosure under Rule 62(1) |
|---|---|
| Buyer or seller has their own licensee | Give their licensee your licensed status and registered brokerage name |
| Buyer or seller is unrepresented | Give them your licensed status, brokerage name, direct or indirect interest, details of any negotiations for a further trade, and information you know that could materially affect value |
Suppose an associate wants to buy an unrepresented seller's duplex through a holding company. The associate knows of a potential land assembly that could affect value and has begun talks with an eventual purchaser. Before presenting the offer, disclose the licence and brokerage, the interest through the company, the value information and details of the further-trade negotiations. The other party can obtain independent advice before deciding how to respond. An associate who is the buyer acts in their own interest and cannot represent the seller in that trade.
When the brokerage lists or manages the property
Rule 62(2)–(3) adds a duty for the brokerage when someone associated with it, or an immediate family member of a covered individual, wants to acquire an interest in property that it lists for sale or manages. For example, if an employee's sibling wants to buy the brokerage's listing, the brokerage must immediately tell the seller about the conflict, who the buyer is, how they are connected to the brokerage, what confidential information about the seller the buyer already received and who will represent the buyer. Give the seller the opportunity to obtain legal and independent advice. The brokerage's disclosure is separate from the licensee's duties in a personal trade. Rule 53(c) requires the associate or associate broker to supply the applicable transaction documentation to the broker in a timely manner.
Guaranteed sale agreements
A guaranteed sale agreement is a written undertaking to pay a fixed or determinable amount within a fixed or determinable period for the seller's property. Under Act sections 19–20 and Rule 63, an associate may advertise or offer it only on behalf of their registered brokerage and within the statutory requirements. The brokerage should disclose the pricing formula in its advertising or direct the seller to it, and the purchase contract should state the price, possession date and terms.
The statutory deposit is at least 5% of the total amount that may be payable, held in a separate trust account for the seller. A brokerage guaranteeing $440,000 must deposit at least $22,000. The deposit counts toward payment as directed by the seller, is forfeited to the seller if the seller is not paid according to the agreement, or is returned to the licensee if no money remains payable under the agreement. The seller owes no commission to the licensee or other guarantor who purchases under the guarantee. Keep this rule distinct from the written personal-interest disclosures under Rule 62.
Paid referrals and client information
In the course of providing services, a licensee who refers someone and knows a fee, remuneration or benefit may result must disclose in writing that the person's name and contact information were forwarded and that the licensee may receive a benefit. Retain a copy under Rule 45(2). When referring to someone believed to be a licensee, take reasonable steps to verify that person is authorized for the specific activities, under Rule 45(3).
For a planned referral, tell the client in writing who would receive their contact details, why the information would be shared and what benefit you may receive. RECA advises obtaining the client's informed written consent before sharing, consistent with Rule 44 and applicable privacy law. Disclose a known amount, and provide details when available if the amount is initially unknown. Rule 54(1) requires trade-related fees to go through the registered brokerage. Follow the broker's referral policy and allow the client to choose their own provider.
For example, a mortgage brokerage offers an associate $500 if a referred buyer closes a mortgage. The associate explains the benefit and proposed transfer in writing, obtains consent before sharing the buyer's contact details, verifies the mortgage licensee's authority for the service, retains the disclosure and handles the payment through the real estate brokerage. The conditional payment still creates a disclosure obligation.
Official sources
An associate wants to purchase a residential condominium unit being sold privately by an unrepresented owner. The associate plans to renovate the unit and resell it for a profit within six months, and is also in preliminary discussions with a potential resale buyer. Under Rule 62 of the Real Estate Act Rules, which procedure must the associate follow?
The associate may write the purchase contract using standard forms and verbally mention their licence status to the owner before closing.
The associate is exempt from written disclosure obligations because the condominium is a private sale not listed on the regional MLS system.
The associate can submit the offer through a numbered corporation and disclose their personal involvement only if the seller asks for shareholder details.
Before presenting the offer, give the seller written disclosure of licensed status, registered brokerage, personal interest, known information that could materially affect value and details of the resale negotiations.
A licensed brokerage enters a guaranteed sale agreement with a seller for $440,000 and later buys the home under the guarantee. What does section 20 of the Alberta Real Estate Act require?
Deposit at least $22,000 into a separate trust account for the seller and charge no commission on the brokerage’s purchase under the guarantee.
Deposit $4,400 into the brokerage’s operating account and charge the standard sale commission.
Deposit $22,000 in the associate’s own account and charge commission with the seller’s oral consent.
Wait until the sale closes to fund the trust account and deduct commission from the guaranteed amount.
A real estate associate refers their buyer client to a preferred mortgage licensee and plans to forward the buyer's name and contact details with an expectation of receiving a $500 referral fee upon funding. Under Rule 45 of the Real Estate Act Rules and brokerage rules, how must the associate manage this referral?
The associate may accept the $500 fee directly without informing the client because mortgage financing is regulated separately from residential sales.
Disclose the proposed sharing and potential fee in writing, obtain informed written consent before sharing, keep a copy, verify the mortgage licensee’s authority for the service and arrange payment through the brokerage.
The associate can only accept non-monetary gift cards up to $250, because cash referral fees are prohibited across all Canadian real estate transactions.
The associate must wait until the mortgage funds and then deposit the $500 directly into the client's legal trust account without written disclosure.
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